| MCA has issued the 6th ROD order dated 24th July. The ROD deals with definition of the term “related party” under section 2 of the Companies Act 2013 and provides relief for the difficulty arising due to absence of the word “relative” from certain clause of the definition resulting in disharmonious interpretation. |
| As per the ROD, in section 2 of the Companies Act, 2013, in clause (76), in sub-clause (iv), after the word “manager”, the word “or his relative” shall be inserted. |
| Relevant text of the Section 2(76) is given below: |
2(76) “related party”, with reference to a company, means—
- a director or his relative;
- a key managerial personnel or his relative;
- a firm, in which a director, manager or his relative is a partner;
- a private company in which a director or manager is a member or director;
- a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;
- any body corporate whose Board of Directors, Managing Director, or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;
- any person on whose advice, directions or instructions a director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;
- any company which is—
- a holding, subsidiary or an associate company of such company; or
- a subsidiary of a holding company to which it is also a subsidiary:
- such other person as may be prescribed;
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